As a child, my mother told me all these stupid lies, and when I discovered the truth at age 7, I HATED her for lying, so much so that I refused to speak to her for several years (yes, this is truthful, she'd always said she didn't/wouldn't lie to us kids, but she'd done just that, and lied to us all along).
I vowed that I'd never lie to my kids and my DH agreed. So, we've NEVER LIED to our kids, never told them santa/tooth fairy/easter bunny/elves etc were real, and that everything they had (sweets, clothes, toys etc), was bought by us, and that we had to work to earn the money to do so.
Then some kid in my eldest's class at school argued with him that santa was real (when he was 6) and he came home spouting this rubbish, so I took him into the city centre that weekend, and we trekked around, expecting to see a many as 5 different santas in one afternoon, so he could see that they were all different, wearing fake beards etc, and that there was no way that one of them could move from place to place when there were queues waiting to see them. He realised by the time we were in the third queue that I was right and the kid at school was wrong.
My kids are now grown adults and have said that if they ever have kids they will also tell them the truth, and not lie about something that can do easily be disproved.